Improvement in technology

Assignment Help Microeconomics

Reference no: EM13680667

Consider Solow's model when the production function is Y = 1000K0.3
L0.7 . The population growth rate is
2%, δ = 0.1 is the depreciation rate and s = 0.25 is the savings rate.
Suppose this economy was in its steady state when unexpectedly Total Factor Productivity increases by 10%.
a) Compute how much more output there is in this economy immediately thanks to this improvement in technology.
b) Assume that the economy has made the transition towards its new steady state. Perform a growth accounting exercise: given the initial and the final steady states, compute how much of growth per unit of labor is accounted for by the increase in capital per unit of labor and how much is accounted for by the technological improvement.
c) Discuss to what extent the result of this accounting exercise is correct. Remember that the savings rate did not change at all.

Reference no: EM13680667

Questions Cloud

Find what the magnitude and direction of the electric field : A straight, non conducting plastic wire 9.50 centimeter long carries a charge density of 130 nC/m distributed uniformly along its length. Obtain the magnitude and direction of the electric field this wire produces at a point 5 centimeter directly ab..

Choosing a reference organization : Choosing a Reference Organization

Find which block has more thermal energy : Two blocks of copper, one with a mass of 1 kilogram and the other with a mass of 3 kilogram are at the same temperature. Find which block has more thermal energy

Find how much energy goes from the rod into the fire : One end of a short aluminum rod is in a campfire and the other end is in a block of ice. find how much energy goes from the rod into the fire

Improvement in technology : Compute how much more output there is in this economy immediately thanks to this improvement in technology.

Compute what is the intensity of the wave : An electromagnetic wave with frequency 65 Hertz travels in an insulating magnetic material that has dielectric constant 3.64 and relative permeability 5.18 at this frequency. Compute what is the intensity of the wave

Evaluate what the charge of each capacitor : A parallel combination of a 1.17 μF capacitor and a 2.95 μF one are connected in series to a 4.67 μF capacitor. Evaluate what the charge of each capacitor

Compute the electric field just outside the surface : A spherical capacitor contains a charge of 3.00 nC when connected to a potential difference of 210 Volt. Compute the electric field just outside the surface of the inner sphere

Supply and demand schedules for e-books : The use of E-Books has increased in recent years, especially with the advent of mobile E-Readers. A marketing research firm recently developed the following supply and demand schedules for E-books:

User Account

All Pages